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Liam Dann: Genesis sale a backdown or just pragmatism?

26 Feb, 2014 1:50pm

2 minutes to read

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The Government has announced its Genesis share offer will proceed next month but it may sell less than the 49 per cent offered if there is not enough demand from potential buyers in a "front end bookbuild".The Government expects to sell between 30 per cent and 49 per cent of the shares in genesis. When the programme was first mooted, the government said it would offer up to 49 per cent of power companies.

State Owned Enterprises Minister Tony Ryall was on the defensive in the initial press release "State Owned Enterprises we announced the share offer programme almost three years ago, we said that we would sell up to 49 per cent of these companies, subject to market conditions."

The goal was 49 per cent of each power company and a grand total of $6.1 billion for the state. Last December Bill English revised that to $4.8 billion and perhaps that will go lower if demand isn't there for Genesis.

The Opposition's threat to regulate the energy market has been costly for the Government.

But if - like Bill English - you don't have an ideological issue with sale and are comfortable that these assets remain state controlled then you'd still argue that the programme has unlocked billions of under-utlised capital which can now be put to better use.

The flip side to that argument is that the long term economic case for keeping the assets isn't so different to the one the Government has used to convince shareholders to buy them.

Shareholders haven't been thrilled with the market performance but today's Mighty River Power result was a reminder that with a return of 5.2 per cent (based on the $2.50 issue price) Mighty River remains a solid investment.

See John Key discussing the Genesis sale here:

Prime Minister John Key has confirmed the Government will go ahead with the partial privatisation of Genesis Energy over the next month or so but has underlined the sale will be the last one under a National Government.